Executive Summary
•In Q1 FY2019, the Dentsu Group delivered total growth of revenue less cost of sales of 2.3% (constant currency basis) and organic growth of -1.6%.
•The Japan business delivered -0.8% and -2.7% respectively, mainly due to a decrease in traditional media in the Japanese market, partially offset by digital-related services and favorable results in subsidiaries.
•The international business, Dentsu Aegis Network, delivered 4.8% growth of revenue less cost of sales (constant currency basis) and -0.7% organic growth, impacted by negative growth in APAC mainly due to weakness in the Australian market.    
•Despite a soft start to the year, revenue is expected to build as the year progresses.
•There is no change to the full-year guidance announced in February 2019.


*Revenue less cost of sales is the metric by which the Group's organic growth is measured. Organic growth represents the constant currency year-on-year growth after adjusting for the effect of businesses acquired or disposed of since the beginning of the previous year.
** See page 5 in the enclosed PDF for definition of "underlying."
*** See page 5 in the enclosed PDF for definition of "EBITDA."
 
Highlights of Q1 FY2019 results
•The Dentsu Group delivered growth of revenue less cost of sales of 2.3% (constant currency basis) :
o-0.8% in Japan, and 4.8% at Dentsu Aegis Network driven by acquisitions.
oThe breakdown in contribution is: +8.8 billion yen from M&As, -3.7 billion yen by organic growth, and -3.7 billion yen from foreign exchange rates.

•The Group produced organic growth of -1.6% :
o-2.7% in Japan, and -0.7% at Dentsu Aegis Network. The Japan business declined due to a decrease in traditional media in the Japanese market, partially offset by digital-related services and favorable results in subsidiaries. The international business was impacted by negative growth in APAC, due to weakness in the Australian market, softer client spend and cycling out of account lost in FY2018.
oDigital business contribution to total revenue less cost of sales reached 47.0% (Q1 FY2018: 43.7%), including 27.7% in Japan (Q1 FY2018: 23.0%), and 62.5% at Dentsu Aegis Network (Q1 FY2018: 60.8%).
oInternational business contribution to total revenue less cost of sales reached 55.5% (Q1 FY2018: 54.9%).

•Group underlying operating profit was 24.4 billion yen (Q1 FY2018: 32.7 billion yen).
o24.6 billion yen in Japan (Q1 FY2018: 30.4 billion yen), and -0.1 billion yen at Dentsu Aegis Network (Q1 FY2018: 2.3 billion yen).
oDifference between the underlying operating profit and statutory operating profit was mainly due to amortization of M&A related intangible assets.

•Group underlying operating margin was 10.7% (Q1 FY2018: 14.4%).
o24.3% in Japan (Q1 FY2018: 29.7%), and -0.1% at Dentsu Aegis Network (Q1 FY2018: 1.9%).
oThe decline in Japan was mainly due to planned SG&A costs related to investments to drive future growth. At Dentsu Aegis Network, a softer-than-expected start to the year impacted on the operating margin which was seasonally low in the first quarter and was within budget.

•Underlying net profit (attributable to owners of the parent) and underlying basic EPS decreased by 30.2% and 30.2% respectively, mainly due to the decline of underlying operating income and an increase of finance costs.
oDifference between the underlying net profit and statutory net profit was mainly due to operating profit adjustments and a loss on M&A related put-option liabilities.

Toshihiro Yamamoto, President and CEO, Dentsu Inc., said:
"In Q1 FY2019, Dentsu Group recorded a decline in organic growth of -1.6%, with -2.7% in Japan and -0.7% at Dentsu Aegis Network.
It has been a soft start to the year and challenging market conditions remain, however, we expect to see revenues build through the remainder of the year. In Japan, a number of world-class, one-off events will positively impact our results particularly in H2 FY2019. At Dentsu Aegis Network, the cycling out of accounts lost in FY2018 and the on-boarding of new business wins will begin to impact results in H2 FY2019.

In Japan, investment has continued to drive sustainable future growth with key investments in our IT infrastructure and our digital business. At Dentsu Aegis Network, operational excellence remains a key priority, with the next stage focusing on client and media operation processes.

At the end of March 2019, our shareholders endorsed our plans to reorganize the corporate structure of Dentsu Inc. effective January 1, 2020. The holding company 'Dentsu Group Inc.' will support all Dentsu Group companies and our combined 62,000 talented people. The new structure will allow for greater corporate governance and improved integration between Dentsu in Japan and Dentsu Aegis Network. Workstreams are already underway across many of our corporate functions and business lines to ensure a smooth and seamless transition.

There is much to do in the remainder of the year, but through maintaining our continued focus on driving innovation and pursuing excellence in everything we do, I am confident we can continue to deliver even greater value for our clients."

For further details, please see the attached PDF file.